I just received word that the US Trustee’s office has again released new median income numbers for Minnesota. If you want to file a Chapter 7 bankruptcy, it is best if your household income is below these medians for your household size.
The new number for a household of one is $66,334 per year. For a household of two it’s $84,207; for a household of three $105,800; and for a household of four is up to $130,852.
The numbers are based on data from the U.S. Census Bureau. The figures have increased for a household of one and for a household of four, but have gone down for households of two and three. The increase for a household of one was about $800 per year, and for a household of four it was about $5,000 per year. But for a household of two it has gone down by $645 and for a household of three it’s down by $2,151. Certainly it’s a mixed bag this time. If you thought you might not be eligible for Chapter 7, look again. The history here seems to be that every time they do an update, the numbers go up at least a little bit; although that was not the case in all categories this time..
People who were not eligible before for a Chapter 7 bankruptcy might be eligible now. I do free telephone consultations. 952-544-6356. Wouldn’t hurt to check with me to see if you qualify.
As explained on the Chapter 7 page and Chapter 13 page of my site, most bankruptcy eligibility questions key off how your income compares to the median income levels set by the Justice Department for the state in which you live. The justice department has a new median income update which becomes effective April 1, 2014. The income levels for all family sizes in Minnesota have gone up by at least another $1,000 or so per year. The new median incomes are are follows:
Add $8,100 for each individual in excess of 7.
Every case is different, but in most cases if your gross income annualized over the six months before filing comes to less than the median for your household size, you should qualify for a Chapter 7 bankruptcy. If your income is higher than the median, there are other options. One option is to try doing the means test. If you pass, a Chapter 7 might still be possible. If not, your most likely choice would then be to do a Chapter 13 bankruptcy.
Even if you pass the means test, sometimes a Chapter 13 is still a better idea. It seems that once your income is above median, the trustee’s office presumes that you are not entitled to a Chapter 7. You will have to be ready to prove all the information that you put in the means test. You may be asked for several months of bank statements. You may be asked about the income of any children or other individuals in your household. The reasonableness of the expenses you claim may be challenged. By the time the trustee is finished with this process, you may decide to convert your Chapter 7 to a Chapter 13; and if you don’t you may neverthless wish you had started with a 13 in the first place.
While there are mathematical formulas involved, it remains more of an art than a science. The trustee’s office looks at the numbers but also at the totality of the circumstances in deciding how much trouble if any to give you. You need to get a competent lawyer and stay close to that person as you go through the process.
This post is for general information purposes only and does not create an attorney-client relationship. It is not legal advice. I am a debt relief agency, helping people file for relief under the federal bankruptcy code.
Whether you qualify for a bankruptcy and what type of bankruptcy you qualify for is largely a matter of what your household income is – gross annual income based upon and calculated from what happened over the past six calendar months. It seems to me that I just finished posting an update on these numbers, but that was in May and already new numbers have come out – effective November 1, 2012.A table showing the new numbers for Minnesota can be found on my Chapter 7 page. They are bad news for anyone who lives alone or in a two person household, since the median incomes for one and two person households have gone down this time. The median annual income for a family of one dropped by $496 per year and the median annual income for a family of two dropped by $738. For everyone else, those in households of more than two persons, the news is good. The annual median income for a family of three actually increased by $1,300. For a household of four it went up $409, and for household sizes above four it went up $409. These increases are of course per year increases, so even the largest – the one for a household of three – is only a bit above $100 per month.
I can’t explain why these numbers changed, or why there is such a difference from one size of household to another. I can only report that the change did take place. I have been watching these changes, which usually take place very six months, for several years now. It seems to me that they usually go up across the board. The fact that some have gone down this time and that the rest have not gone up by much – to me this seems to indicate serious weakness in the economy.
Whenever I am meeting with a client to go over bankruptcy possibilities, I have to explain that these median income tables are subject to change. If somebody qualifies now but is close to the edge, haste in getting the case filed might be advisable. If a person or couple is above the applicable median income, they may try doing the means test. Usually someone who is just a little bit above the median income can pass the means test and still file a Chapter 7. I have to caution, however, that above median Chapter 7 debtors are subject to much closer scrutiny by the US Trustee’s office than are those who are below the median.
Lots more can go wrong in a Chapter 7 bankruptcy when the income is above median, even if the Debtors do appear on paper to have passed the means test. Often it is safer for folks in these circumstances to file a Chapter 13.